One prominent real estate analyst predicts a 10% drop in home values over the next 18 months.
Cormac Lucey, an economic expert and lecturer at Chartered Accountants Ireland, warned that a decrease in property prices would not make the search for a home any simpler because of a lack of available homes.
Long-awaited price stability in the housing market has been documented in the most recent Daft.ie home price report. The national average listed price in Q3 2022 was €311,514, up 0.1% over the previous quarter’s average.
Mr. Lucey, speaking yesterday on RTÉ’s Brendan O’Connor show, predicted price reductions in the coming months.
However, if the shortage of available homes persists, prospective buyers will continue to be at a disadvantage. Finding a home is a unique challenge for each couple or family. If home values decline, they may be able to utilise their funds to cushion the blow. And I expect them to fall during the following 18 months, albeit probably not by much more than 10%. However, that won’t address the underlying issue of a shortage of housing for the general public.
He remarked that “the economics of people versus houses remain unchanged” regardless of the asking price.
According to Daft.ie’s analysis, the number of properties for sale on September 1 was approximately 15,500, an increase of 22% from the corresponding day in 2017 and the biggest total in the country in nearly two years.
Ronan Lyons, the report’s author, underlined Mr. Lucey’s emphasis on supply, writing, “the health of Ireland’s housing system is ultimately measured by how responsive supply is to demand.”
He predicted that 25,000 new homes will be built in Ireland this year, and that current projections for next year are “most optimistic.”
This is due in part to rising construction costs (almost 15% in a single year according to the SCSI’s latest figures) and in part to the fact that, as of late, Ireland’s planning system has effectively become embedded in Ireland’s legal system, reducing the efficiency with which permissions are converted into actual construction.
This occurs as homebuyers face increasing financial strain from rising interest rates and other costs of living.
The European Central Bank boosted interest rates this month by a record 0.75%, which will cause annual mortgage payment increases for thousands of homeowners of more than €1,000.
Nearly 400,000 Irish borrowers are affected by tracker mortgages since their payments would increase immediately.
Borrowers with variable interest rates are also likely to bear the brunt of the increase, given these borrowers’ rates were not adjusted by major banks in response to the ECB’s rate hike in July.
The maximum amount a borrower may get from Bank of Ireland is now 2.5 times their annual income, which is one multiple lower than the Central Bank’s norm of 3.5 times.
Last week, Housing Minister Darragh O’Brien announced that more than 1,000 applications had been submitted for the Government’s First Home Scheme in its short two-month existence. If a homebuyer’s down payment and mortgage don’t quite cover the cost of the house, the program’s €400 million fund will make up the difference. Thinking of buying or selling property in Ireland contact us today as we may be able to help.